The Middle Kingdom awakes

Posted Wednesday, August 20, 2008, at 9:47 AM

China is using the Olympics to showcase it's emergence on to the world stage as a major power.

It is clearly putting its best foot forward. But it is also demonstrating, through its stifling of dissent and the questionable qualifications of some of its athletes, as it steps on to the world stage it will be playing by its own rules.

Historically, China has been known internally as "the Middle Kingdom," placing itself between heaven and all the other nations of the earth. Despite several centuries in which it clearly was a third-rate country, psychologically it has always maintained a certain superiority complex.

When the communists came into power in 1948 China remained a backstage player on the world scene for a very long time. But after the deaths of the original ruling circle, the new leaders of China began embarking on a major change in emphasis. Political purity of communist thought and military might became secondary in favor of economic reform. The military has gotten much smaller, but qualitatively much better, in part due to the growth of Chinese infrastructure.

When Hong Kong was reabsorbed into China (the British lease ran out), the government allowed Hong Kong to continue it's "capitalistic" ways and quickly learned that capitalism could power an economy far better than communism. Over the years, the more "modern" government began allowing "free enterprise zones," similar to what had been allowed in Hong Kong, to be established in other major Chinese cities. Slowly, those zones were expanded, until now at least half of the Chinese economy is allowed to operate under some form of capitalism.

Over the last ten years, I've watched that growth with alarm. Anybody who has ever lived in or visited Hong Kong, as I have, knows that the Chinese are the world's greatest capitalists when given a chance. They make the Japanese look like clumsy backwoods businessmen.

They are tough, hard bargainers who can operate on much lower profit margins than almost anybody else in the world. Frankly, I kept hoping China would remain a communist economy. The longer they did, the longer they wouldn't become a threat to the United States.

But it has come as no surprise to me to see China explode economically. It's one of the reasons you can't afford to buy gasoline here anymore as China quickly is buying up all the world's oil to deal with the number of cars on its road, which are rising at phenomenal rates.

China is developing a rapidly growing middle class, something it has never really seen ever before in its history. And they want the same thing the middle class in every other country of the world wants -- cars, good housing and toys (read TVs, computers, etc.).

In the end, this will probably mean the downfall of the communist government, in the same way that it did for the old Soviet Union. But that's not going to happen soon. The historic cultural systems of China fit well into the current communist bureaucracy (and it's form of government can really best be described as a bureaucracy gone wild -- it's the bureaucrats who are really in power).

The current leadership has two main goals. The first, is to bring its people up to a western style standard of living within the first quarter of this century. They're a long ways toward achieving that goal already.

Their economic power already has an enormous influence on the world economy (1.3 billion people will do that). It cares little for "balance of trade." Whatever helps China has absolute priority over the concerns of any other nations. And it's economic arm is reaching out to take control over western democracies. It now owns, for example, nearly a trillion dollars of U.S. debt, most of in the form of U.S. Treasury notes.

It's second objective is to reclaim Taiwan by 2048, peacefully if it can, by force if it must.

It may be quite a while before China is capable of projecting military power beyond it's immediate borders (one of the marks of a true superpower), but it is rapidly gaining the military might and force structure to reclaim Taiwan by force if it has to.

This is rapidly going to put the United States between a rock and a hard spot. As we become more dependent of China economically (and we will, if for no other reason than it's the biggest consumer market for our goods out there), our military alliance with Taiwan will become more and more uncomfortable for us in terms of realpolitik. And while we have the best military in the world now, there are signs that the infrastructure in the United States that helped create that military are beginning to fray.

Much of our strength has been in our emphasis on R&D. But less and less of our economy is being directed to maintaining our technological edge, and fewer and fewer of our students are graduating in fields that would help us keep it. The reverse is true in China, where R&D is increasingly supported and more and more scientific papers are being written by Chinese than the rest of the world combined.

Look at one tiny example. Within the next five years the United States will become entirely dependent on our "good friends" the Russians to put an American in space. And after that we'll have a gap of at least five years in which we will no longer be a spacefaring nation. But the Chinese have become one and may beat us back to the moon.

The competition between the United States and China at the Olympics is just the tip of the iceberg and the forerunner to what is looming as a major clash for world leadership.

And as the rest of the world is suddenly discovering, as the curtain is being pulled back on the world to get a close look at the real China of today, the "Middle Kingdom" is going to be a force to be reckoned with.

And we have only ourselves to blame for this. The US gave itself away all in the name of money. I hope the cheaper labor has been worth it. Why complain about it now, it is a done deal. Thanks NAFTA...what a great deal that has been for everyone BUT the US.